All Forum Posts by: James H.

I think this statement is too simple. How did the first property get paid for? Did it buy itself?

So, there are different investment strategies. I have seen ghettos gentified and now the elite neighborhoods. It was a bunch of ancient crap and how it's everybody has it bad for those hardwood floors. I've seen new neighborhoods turn into largely section 8 neighborhoods in 10 years or less. I've seen the exact opposite occur in different areas for one reason or another.

Why not do a little of both (cash flow and appreciation investing)? Personally, I like to concentrate on good structurally sound houses that will cashflow. My thought, or hope, is that if the area is composed of good construction and a good location (by location I mean proximity to down town or some other place people need to be at-not locations as in "this is a nice neighborhood")then property prices will at least keep pace with inflation and probably do better if the area is currently depressed (undervalued).

I am not going to wait for the profits from my first house to buy my next house. I will apply that profit with my paycheck and get the second house faster than I did the first. And then add paycheck to the 1st and 2nd to get the third. Once I have about 5 houses, if I have invested correctly, those houses should buy, or at least make big down payments, on the rest of my houses every year or two thereafter.

If we comnpare net worth (or better yet, cash in the bank) at the end of 30 years and I have $2 million and you have $3 million, so what? We've both done good doing it our own way - the way that we wanted to do it - as our own boss - not cow towing to other people's opinions.

Wow,

I'm glad I read this thread. We were contemplating setting up a business bank account to let our tenants use for deposit but haven't done so yet because we just weren't sure about it and were marinating the idea. I also wanted to leave the option to inspect the property when collecting the rent without explicitly stating that I was doing so.

Uncontrollable partial payments is something I never even thought about!

Thanks for posting!

2 percent rule starts to loose relevancy once you start exceeding gross rents of around 500 to 500 in my area and in many others from what I have gathered on BP.

Is the 2 percent rule more applicable to multiple unit buildings when moving into higher prices?

I wouldn't buy and hold a house with a damaged foundation sitting on expansive soils unless I could get it repaired with helical piles seated below the depth of seasonal change in soil moisture content. Get a price on helical piles, run the numbers and make an offer that works. Otherwise, there are thousands of other deals with less issues to contemplate.

"Everyone says walk. Why? If everyone thinks there are better deals then who will buy this and at what price? Will it go to auction and be sold for 43K? Be sold in a lot of 200 houses for 25k each--to the ex-ceo of Countrywide?"

Nobody knows any details about your oppurtunity except that it has a damaged foundation. How do you expect to get any better responses if that's all anyone knows? Even your price of 90K is hypothetical. What are the comps? What is the ARV? What is the average rent? ? ? ? How could anybody give you advice without having financial insight to your deal?

Well, I do have an oblique perspective on this. I work as a geotechnical engineer. So, although my personal real estate experience is VERY limited, I do work with land developers, builders both large and small (commercial and residential)and many other characters in the real estate investing/business spectrum.

What we notice today is that the deals (projects that we provide testing for)are generally much smaller in scope than before the economic down turn. New developments have been divided into smaller phases and sub phases, large commercial projects have been reduced in scope. However, our total number of jobs has remained about the same.

So, maybe there are more people subscribing to your ideas than you think. For us, there are several parts of our team that remain the same in size despite the size of the project. What I mean is that the relative cost to do 100 smaller jobs is more than the relative cost to do 100 similar jobs that are larger in scope. But, we will take what we can get and it appears that our clients, pushing and shoving as they do, feel largely the same way. Maybe your observations are a condition of your client base rather than what is happening at large.

We have a pretty diverse client base ranging from the super high end, highrise whatever all the way down to the small home builder that does two or three homes a year. Most clients have niches that they are comfortable with. Some stay withing certain scopes and will have broad ranges of project types within that scope. Others are so specialized as to only participate in, say, medium end nursing facilities - only.

My observation is that people tend to stick with the business model they know until they are forced to change it or die. Otherwise they fear loosing money through mistakes in areas of less competency.

Bryan,

At the risk of participating in a topic more sophisticated than my current station; it seems to me that if you have the money to invest at any given moment and enough to do it in regular and small time intervals, you should find something to invest in, even if it's not an awesome deal, as long as it's a good deal. I would agree with this philosophy, although only from a spectator's vantage point.

If you are a smaller investor and have limited funds and are constrained by outside limits such as needing time to accumulate more funds to act on the next deal, then the considerations are different (at least I think they would be). If I have to wait two years between deals because my access to funds is limited, it might be better to wait another 6 months to find a better than good deal, would it not?

I forgot to install a mailbox for my rental property (just bought a couple months ago) after fencing off the front yard and preventing access to the house mounted box. Got a call from the tenant that the utility company couldn't find the house to transfer the utilities(no mailbox and numbers pulled off the house for exterior painting :O). So that was my first maintenance call on my first property - installing a mailbox. Tenants, give em an inch and they take a mailbox, haha!

Hey Travis,

I recently bought a house cash and carried the rehab on consumer credit. I would be weary of carrying a balance that you couldn't pay off within two years, regardless of the performance of the property. Then if you can't refi, your stuck with less than optimal financing, but you're still free and clear after a couple years, or preferrably less.

Something Jon pointed out to me yesterday regarding refinancing is that a bank would rather refi on terms than do a cash out refinance. Using a HML rather than a CC will get terms established on your purchase and make it easier to refi. Using a CC rather than an HML will show that you own the house free and clear and banks will be more weary about financing. PLUS you now have all this unsecured debt working against you credit and your debt to income ratio. Nobody can tell you ahead of time if you will qualify for finacing after you have established your consumer debt, so it is very risky.

I think this stategy would actually be pretty awesome if you had the cash to cover the deal anyways. Then you could use 0 % apr for a year or whatever and then just pay it off. Or if you got "got" by the bank, you could pay it off and tell them to shove it - which always feels good! Otherwise, the risk of getting stuck with a super high interest rate is very high. Years ago I worked in a customer service call center for a major credit card company. That was back when 22.99% was the dreaded punitive rate. Trust me, there was no way of getting out of that rate and once people got hit with it, they would scream, yell, cry and beg, but there was no relief because now they had poor credit and were over a barrel. I can't imagine paying the rates they have now - 29.99 % !!!

In my opinion and experience, only the slickest of the slick fully maximize these introductory rates. That being said, I am using consumer credit and just consider it the cost of doing business until I can get something better lined up. But my CC rate is 12% with a credit union and without the "gotchas!" attached. An unsecured line of credit runs me about 14% and I have average credit.

J Scott,

My bad. That is just what I learned in a construction contracts and liabilities class - that no judge would uphold a contract that had no consideration for an agreement. I don't have personal experience in court regarding anything beyond traffic tickets, though. :D

and so the age old question begins: what came first, the starbucks or the gentrification?....lol!